Friday, May 23, 2008

Cross price elasticity of demand, popcorn edition 

The rocketing price for corn already is hurting Americans at the grocery store and the gas pump. Now it�s going to hurt us at the multiplex, too.

Partly because of the rising price for popcorn, on Thursday Kansas City-based AMC Entertainment Inc. announced that beginning today it will increase its ticket prices from $9 to $10 for weekend show times after 4 p.m. at its five Kansas City theaters.

Also beginning today, AMC�s popcorn price will jump 25 cents nationwide.
Source. That must have a lot of people scratching their heads: If the price of corn is going up, and you sell popcorn, why do you raise BOTH the price of popcorn and the price of the movie ticket? There's been a number of books that have gotten at that question, as Steve Landsburg notes in his review of Tim Harford's Undercover Economist. But now Richard Mckenzie has titled his book Why does popcorn cost so much in the theater? Tyler Cowen points us to a trailer Mckenzie has done, which includes a tip on how to recover that $.25 on the popcorn, which adds something to the puzzle I think.